Wednesday, January 16, 2019

International Business in Japan

AbstractCapitalist and mostly single family centered, Zaibatsu led to a placid administration with weak competitive forces resulting in what is know as liqueur oligopoly. (Niciejewska, 2007, pg 17) Keiretsu entanglements on the earliest(a) hand, with its cross stock retentivenesss is to a greater extent dynamic and provided a more competitive concern scrimping that continued to drive the Nipponese economy during the post war period. The laid-back viscidness that existed between the fighting(a) warms in the unsloped keiretsu resulted in achievement and operational efficiency that gave Nipponese manufacturers significant advantages in internationalistic commercializes. The impact of schooling engineering and the net income in particular enabled the western countries implement modular payoff strategies and modify value kitchen stove management with setting up of contract issue centers crossways the globe. The japans keiretsu firms struggled to fight the America n companies that specialized in single upshot functions backsheeshing to what is cognise as the mega competition. Keiretsu networks ar unsuitable under youthful, globally competitive, and technologically advanced market conditions. There is by all odds a transport towards a more western centric handicraft organization.Introduction Nipponese corporate g overnance has undergone a lot of change since the Meiji restoration in 1868. It was during this time that the industrial revolution flourished across the world. The Zaibatsu originated when the Meiji governance sold break through certain government undertakings to a select few private and prestigious families namely Mitsui, Mitsubishi, Yasuda and Sumitomo. These government assureled firms slowly developed into different industries that helped Japan heighten economically toughened. During this period Japan practiced a closed economic organisation and foreign technology was totally shunned except in areas concerning nat ional development (Thorson &038 Whitney, 2003). The Zaibatsu which could be loosely translated as monopolies emerged as the corporate mental synthesis that underlined the Nipponese economy from this time till the end of the Second mankind War. In particular, the Zaibatsu or the industrial and financial conglomeration of the Nipponese empire controlled a large percentage of the national economy during the first few decades of the twentieth century. In the af bournath of the World war 11 and the melody of Japan by American forces, the Zaibatsu system was broken down and this gave climbing to what is what is known as the Keiretsu system which is nothing but a throng of companies with cross shareholdings and discriminatory channel practices. Though the American government was solidification on totally destroying the protectionary policies that the Zaibatsu system understanded and proceeded with the dissolution of numerous Zaibatsu much(prenominal) as Asano, Furukawa, Naka jima, etc they stopped short of complete dissolution owing to dread of the intrusion of Chinas communist practices into Japan. The formation of Keiretsu was an attempt to democratize the Japanese economy and to eliminate the restrictive policies (Thorson &038 Whitney, 2003). A brief overview of the firm organizes in the Keiretsu and flourishing of Japanese economy between 1950-90, and its implications to the current Japanese economy would be discussed in this paper.Zaibatsu (Upto 1945)As briefly mentioned above, the Zaibatsu promoted a strong monopoly with holding companies at the top of the pyramid controlling all the trading operations between the various enterprises within the pyramid. Holding companies typically enjoyed the majority of the stocks of these businesses and more than 50% of the overall stocks of all the small companies that constitute the Zaibatsu were owned by its members (Thorson &038 Whitney, 2003). Stock options were never sold out to any third parties not co nnected with the zaibatsu making it a totally closed economic structure. The Zaibatsu was in short, a government led economic drive with strategies as soundly as resources provided for by the government. Japans industrial growth witnessed a rapid upswing under the Zaibatsu system. Buoyed by it success at home, the Japanese government forced the Zaibatsu system in Korea when it colonized the country (Shim &038 Lee, 2008, pg 49).The Zaibatsu enjoyed complete command with Mitsui, Sumitomo and Mitsubishi, enjoying as much as 28% of the assets in Japanese companies by 1929. Just when the World War II was about to finish the Zaibatsu had 22.9% of the Japanese company stocks. Thus a handful of Japanese families had control over a vast majority of the Japanese enterprises under the Zaibatsu system. The structure of the Zaibatsu changed rattling quickly and soon there was intense diversification. For instance the single Mitsubishi companionship rapidly diversified its business in to mini ng, shipping, insurance, trading, etc in a actually short period of time and soon trans organize into a holding company that was at the top of the Pyramid controlling a telescope of individual yet affiliated businesses. The Iwasaki family owned and controlled the entire business network of Mitsubishi (Lincoln &038 Shimotani, 2009).KeiretsuKeiretsu represents a cluster of enterprises that are linked to each other by way of cross shareholdings and preferential trading practices creating mutual interests in the business progress. Keiretsu are basically divided into two main types namely upright keiretsu and horizontal keiretsu. However there are to a fault other keiretsu much(prenominal) as the dispersal keiretsu that relate to the distribution networks of bouffant manufacturers. For instance the distribution networks of Matsushita, Fuji Photo Film, etc come under the distribution Keiretsu (Shimotani, 1995). Keiretsu emerged as a protective response to the dissolution and distribu tion of the largely family owned stocks of the Zaibatsu. When unconnected companies were taking over the zaibatsu firms the three main Zaibatsu leaders convened and arranged a solution of cross shareholding and preferential trading policies that enabled them to retain the overall control of the enterprises among themselves. For instance the Mitsui, Sumitomo and Mitsubishi zaibatsu formed this strategic pact of cross shareholdings to maintain their fort in the business. This is how the Keiretsu emerged from the Zaibatsu. Soon by the 1960s a few big financial institutions in Japan such as Dai-Ichi Kangyo, Fuji and Sanwa joined with the Mitsubishi, Sumitomo and Mitsui to constitute what was popularly known as the six horizontal Keiretsu (Lincoln &038 Shimotani, 2009). bimestrial meetings between the prexys council (shacho-kai) members and executive exchanges and cross share holdings formed the glue between these six Keiretsu. The horizontal Keiretsu is centered around a large bank .On the other hand, the vertical Keiretsu are the large manufacturing companies and tot chain companies, the distributors etc. Unlike the crosswise Keiretsu there is no presidents council in the vertical Keiretsu but the groups of suppliers of a manufacturing firm represent that role (Miwa and Ramsayer, 2006). Similar to the horizontal Keiretsu, the firms in the vertical keiretsu are besides linked together by share holdings across firms and preferential business policies. In vertical Keiretsu there is meliorate knowledge communion by way of business transfers including exchange of experts and technical staff members across the vertical network. Overall, vertical Keiretsu promotes change cohesion among the network firms. In fact, the increased colony of main firms on the supplier firms in the vertical Keiretsu even lead to large scale investments by these ancillary Japanese firms in US following the footsteps of the Japanese automobile manufacturing firms setting up their FD I in that dry land (Banerji &038 Sambharya ,1996). In technology intensive industries of Japan vertical Keiretsu has greatly improved their international competitiveness by facilitating rapid knowledge sharing across the partnership firms. Empirical studies that measured the effects of such knowledge sharing across the firms in the vertical Keiretsu cl archeozoic suggest positive originative gains (Branstetter, 2000). One of the important advantages of the vertical keiretsu is the improved coordination between the suppliers and the assemblers. In the keiretsu self-propelled industries the suppliers receive plenty of sustenance in harvest-festivals manufacturing , processing and people management. This is understandably different from the US approach where the suppliers and the assembly line operate just independently. This model of operation facilitates both the parties as it helps to reduce the overall run a guess for either party. (Lincoln &038 Shimotani, 2009) Thus the K eiretsu improved knowledge transfer among the networked firms, improved productivity, trim risk for the firms and gave the Japanese companies clear advantage in the international market.Furthermore, Gerlach (2004), overly notes that the Keiretsus were particularly important due to their one-set principle and networking. For instance, synergies were achieved in input and output, curiously in the case of manufacturing. Centralized systems and departments were used in conducting basic support operations, which helped all subsidiaries in cost savings (Lincoln &038 Shimotani, 2009). Also, profit-trapping mechanisms were used in place, by distributing them in force(p)ly through subsidiaries (Lincoln &038 Shimotani, 2009). Cross shareholdings were also particularly important as it helped avoid takeovers, encouraged risk taking amongst companies, and had a long term outlook on strategy (Sturgeon, 2006). One of the important examples of the vertical Keiretsu is the Toyota group. In fact , Toyota has a unique distinction of being both a horizontal keiretsu as well as a vertical keiretsu. They happen upon leaving is that the sensive size of the Toyota organization makes it possible to exist without being controlled by a central bank as is the case with horizontal keiretsu. Toyota with more than $72 billion in annual revenue has the financial capability to stand for itself without the dependence of any major funding source. However, it is associated with the Mitsui group horizontally. Toyota is also widely diversified like a horizontal keiretsu company with its firms representing industries as varied as real estate, computer development, aircraft development, nonlife insurance, etc.The disintegration of the Keiretsu (Why keiretsu failed?)The keiretsu system started to decline slowly by the early nineties and one battlefield by Gerlach (2004) that analyzed the cluster networking pattern of 257 Japanese organizations between 1978 and 1998 implant clear evidence in dicating this prison-breaking away from the Keiretsu. Analysis of cross shareholdings promote confirmed the decline of the keiretsu structure (Lincoln &038 Shimotani, 2009). By the late nineties many major banks that were previously the heart of the Horizontal keiretsu had already sold attain major portions of their shares to international financial institutions (Ahmadjian and Robinson, 2001). Several bank mergers further move the keiretsu structure. Starting with the Mitsui and Taiyo-Kobe Bank merger in 1990 to the 1998 merger of Industrial Bank of Japan, Fuji and Dai-ichi Kangyo bank the largescale mergers of Japanese financial institutions led to consolidation of the cerebrate keiretsu firms (Lincoln &038 Shimotani, 2009).Globalization and technological changes further led to the withering of the Keiretsu. The numbers of get on of directors were reduced and many foreign personals took up the position. International investors further demanded the exchange off of the stock s in supplier firms and other affiliate firms. Furthermore, the global mooring towards modular ware system and the mathematical product efficiency that it gave rise to, on with a degree of independence between the firms that are involved, kind of erode the production line advantages that Japanese firms specialized in mass production under the keiretsu system had enjoyed for a long period. The growth of information technology and the adaptation of computer simulation technologies in production testing and experiment and swift data exchange between the firms reduced the need for sensual communication (which was key in Keiretsu) and drastically improved value chain management.(Sturgeon, 2006)Modular production is propelled by ease of systems integration facilitated by information technology. By the 1990s modular production system was already in place in the US electronic patience with its contract manufacturers transmit across the globe. While the American firms capitalized on the internet enabled modular production systems and dominated the electronics industry and related computer hardware industry, Japanese electronics industry was unchanging sticking to the components plus products strategy. Cisco systems for instance enjoyed total domination in the network routers market enjoying as much as 80% of the market share while simply outsourcing its device production to contracted producers such as Solectron and Flextronics. Often the production centers are located in low cost regions such as China giving a distinct advantage for the modular production strategy. This contrast between the modular production strategies of the American firms and the in house integrated production system of the Japanese keiretsu firms gave a clear advantage to the American firms. In other words, the Japanese keiretsu firms could not handle the mega competition from the American firms which specialize in single core functions or narrow core competencies. The following inning 1 illustrates the loss suffered by the Japanese keiretsu electronic industries in the early years of the new millennium. (Sturgeon, 2006)Another factor that accompanied global stack is the fluctuation of the exchange rates and its influence on the profit margin. Furthermore, the expanding upon into international markets and the associated transportation costs motivated many of Japans manufacturing firms to move their production facilities abroad as a cost effective solution. Though some suppliers too moved and invested in these new countries, in most cases the central firms such as Toyota started building trust and relationships with the local suppliers. Furthermore, changes in Japanese economic reforms including the Tax policies did not tolerate risk sharing measures as they used to before which clearly undermined one of the key Keiretsu principles.ConclusionThe Large capitalist and mostly single family based zaibatsu companies flourished during the early twentieth century crea ting industrial monopolies that were closely controlled by the government. Zaibatsu led to what is known as a static system as most of the stocks are retained by the family that controls the business. Furthermore Zaibatsu promoted weak competition leading to what is known as cordial oligopoly.) Keiretsu on the other hand with its cross stockholding is more dynamic and provided a more competitive business economy that continued to drive the Japanese economy during the post war period. The high cohesion that existed between the participating firms in the vertical keiretsu resulted in production and operational efficiency that gave Japanese manufacturers significant advantages in international markets. However, the Keiretsu principles of preferential business affected foreign companies from entering the Japanese markets.Globalization and change magnitude pressures from international organizations to sell off stocks in affiliated firms affected the cohesion that previously existed bet ween the participating firms in the keiretsu network. Furthermore, the successful integration and mass production strategies of the keiretsu networks that helped Japanese manufacturing firms flourish were soon affected by the shift in global production strategies. Particularly, the concept of modular production where product design could be isolated from its manufacture and the shift towards outsourcing in the western world created a dent in the Japanese manufacturing sector which was still stuck with the in house production policies. The impact of information technology and the internet in particular enabled the western countries implement modular production strategies and improved value chain management with setting up of contracted production centers across the globe. The japans keiretsu firms struggled to fight the American companies that specialized in single core functions leading to what is known as the mega competition. These fundamental shifts in organizational structure an d strategies in the West have made the Keiretsu networks unsuitable under modern globally competitive and technologically advanced market conditions. There is definitely a shift towards a more western centric business organization.Bibliography Ahmadjian, Christina L and Patricia Robinson. (2001). Safety in Numbers Downsizing and the New semipolitical Economy of Structural Adjustment and Globalization, New York M.E. Sharpe. Jae Seung Shim &038 Moosung lee, (2008), The Korean Economic System, Ashgate publish Ltd. England. James R Lincoln &038 Mashiro Shimotani, (2009), Institute for Research on fight and Employment, Working Paper series, online University of California, viewed flub 9th 2012, Katharina Niciejewska, (2007) The Influence of Social networks in Japanese business. Keiretsu as a Japanese Network. Auflage , Germany. Kunal Banerji PhD &038 Rakesh B Sambharya, (1996), Vertical Keiretsu and international market entry The case of the Japanese automobile ancillary industry, Jo urnal of international business studies. Vol 27, No 1. Lee Branstetter (2000), Vertical Keiretsu and Knowledge Spillovers in Japanese Manufacturing An Empirical assessment, Journal of Japanese and International Economies , Vol 14, Issue 2, pg 73-104 Miwa, Yoshiro and J. Mark Ramsayer. 2006. The caption of the Keiretsu Urban Legends of the Japanese Economy. University of Chicago Press, 2006. Thayer Watkins, The Toyoto Group The One and Only Horizontal and Vertical Keiretsu, Online San Jose State University, viewed Mar 9th 2012, Timothy J Sturgeon, (2006), Modular Productions equal on Japans Electronic industry, MIT, IPC Working papers series. Viewed Mar 10th 2012,

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